Reducing Your Debt By Negotiation
The road to financial freedom may be long and rough. However, becoming debt free is possible. One of the ways to achieve this is to negotiate the debt with your creditor or his agent. But this is not easily obtained. If you find this a difficulty, you can always seek the assistance of a debt management company to negotiate effectively on your behalf.
Video: Real-Time Debt Negotiation
Types of Debt to Negotiate
In most cases, unsecured loans are easier to negotiate. Unsecured loans are those loans without any collateral—meaning you do not part with any property to back up your loan. Examples of unsecured loans are credit cards, medical bills, and utility bills. These are considered unsecured because no collateral is attached to them and for the same reason, they are easier to negotiate. You are not in danger of losing your property when you negotiate your debt based on unsecured debts. Secured ones, on the other hand, are more difficult to negotiate by virtue of the collateral attached to the debt. Should you forfeit payment on the mortgage—whether home or car—you risk your property to be turned over to your creditor. The difficulty lies there when you property is at stake. Creditors can use that argument against you.
Information You Need Before Negotiation
Before you approach or schedule an appointment to meet your creditor, you need to conduct your own research. This means you have to gather sufficient information as proof why you deserve to have your debt negotiated. One of the reasons is to find out how much of the debt you can settle. Determine the length of time in which you can comply with the scheduled payment. Here, you need to ascertain if you can pay all your debts at one-time or by installment basis, granting the creditor will concede to your proposal. Additional information you need to acquire is the extent that your rights are covered by law and the limitations set by your state.
Reasons Why Creditors Might Negotiate Your Debt
Creditors find debt negotiation favorable to them. They would rather recover part of what you owed them instead of losing it all to bankruptcy should you file one. You have what creditors are after; and that is the money that you owe them. Financial author Naima Wilson said, “The reason creditors resort to tactics to pressure debtors to pay is that is all they can do to get the debts paid to them”. Just like in unsecured loans, creditors need to have these debts paid them because the nature of the loan does not allow creditors to retain collateral.
Steps in Debt Negotiation
Wilson provides these steps to help you negotiate like a professional with your creditor (or your creditor’s agent).
Do not negotiate on the phone. Such correspondence should be done by mail.
Keep a record of all your correspondence. You cannot expect the credit agency to do that for you. This way, when you convince them to negotiate, you can have a written proof of that.
Use registered mail. This can help you prove that your letters were received by the credit agency.
Do not relinquish control. Creditors and credit agencies are use to haggling. Do not show your eagerness the first or second time they make a settlement offer.
Be firm but nice. Credit agencies are used to accommodating angry debtors most of the time. If you remain nice throughout your conversation, to let them know that you are serious about your request and you want to help them too. Request lower interest rates and other charges they can waive.
Use the bankruptcy premise. Creditors would loathe seeing you go bankrupt. That means they will not be able to recover the money they lent you. You can ask for their help to stay away from bankruptcy by negotiating with you about your debt.
Make sure to follow through. When you get the approval to the settlement you bargained for, make sure that you make that one-time payment on the agreed date.
Call a professional. If you find it hard to convince the credit agency or the creditor or if you feel inexperienced in negotiation, the best thing you can do is to call a licensed credit negotiation professional to do the negotiation for you. This is the debt consolidation process.
Advantages of Negotiating a Debt
The advantage of negotiating a debt is there is a great chance that the amount you owe will be cut back to a certain percentage; hence you will pay a lower debt amount. Another advantage is you can convince the creditor or his agent to waive some of the charges and reduce the interest rates. These can save you money and help you overcome debt.
Video: Methods of Dealing with Debt Collectors
Disadvantages of Debt Negotiation
If you cannot negotiate in a systematic and customary manner, you might not get the negotiation you are seeking for. Creditors are used to this practice and they will not easily part with their expected credit. If you are experiencing this difficulty, you might end up infuriating your creditor and make matters worse. Wilson said, “You still have the option to employ the assistance of a debt management company who can provide you with the professional advice you need and who can effectively negotiate with the creditor on your behalf”. Getting professional financial advice can help you save up for the payments and finally settle them.